SPARK: Analyzing portfolios and managing risk
Presented by Electrabel
CONTEXT
The electricity market, in a monopoly situation, has only one commercial concern: to meet demand and keep costs down. The deregulation of the market separated the generation, transmission and distribution of electricity, thereby creating a need for trade in electricity and fuel. A new problem then appeared, that of analyzing the impact of future prices on the performance of companies and reducing their negative impact.
INNOVATION
Electrabel sought a new approach to resolve the matter. In developing SPARK, Electrabel found inspiration in the financial world, where this issue has been around for a long time. SPARK is a cutting-edge modelling tool and an asset evaluation platform that adapts the skills of financial engineering to the energy market. SPARK models both electricity and fossil fuel prices across Europe and provides risk management tools relating to asset prices, in addition to derivative products.
RESULTS
In Electrabel’s Strategy Department, SPARK was used for three years to assist in investment decisions. In 2005, it was entrusted to the Trading and Portfolio Management department (TPM) that tested it by managing a virtual portfolio of power stations with potential production of 6,000 GWh. The variation of profiles owing to price fluctuations then fell by 70%. Many subsidiaries have expressed their interest in SPARK - SEI North America, Electrabel in Spain, Italy and Germany – whose activities are expected to be extended to markets beyond Europe and gas.
